1. Steps in Selling Your LLC
2. Transferring Ownership of Your Business

Updated June 26, 2020:

Knowing how to sell an LLC in your state involves several key steps, including understanding the tax consequences, setting a realistic price, and finding potential buyers. Having an operating agreement in place can facilitate the process by making certain provisions clear.

Steps in Selling Your LLC

To sell your LLC, follow these steps: 

  1. Figure out a realistic price range. 
  2. Know your tax consequences. 
  3. Make your business look good in preparation for a sale. 
  4. Look for potential buyers. 
  5. Negotiate a deal. 
  6. Complete a sales agreement. 
  7. Plan for closing. 
  8. File necessary paperwork with the IRS.

To figure out a fair price, you can base it on the value of your LLC's assets and then add in a portion for the goodwill your company has developed. You might also look at comparable businesses in your area to see how much they sold for.

You can look for potential buyers by doing the following:

  • Placing ads in newspapers 
  • Putting ads in trade publications 
  • Placing notices on business-sale websites

You might consider hiring a business broker in order to reach more buyers.

When working out terms of your business sale, you should consider important issues, such as whether you'll sell the entire entity or only its assets, and which assets you might like to keep, i.e., a vehicle. You'll also work out payment terms. In many cases, the buyer will put down a down payment and then pay in installments.

Your sales agreement should include the following: 

  • List of assets 
  • Value of assets 
  • Any contracts the buyer assumes 
  • Payment protections for you

At the closing, you'll transfer your business to the buyer. To minimize any last-minute hassles, create a checklist of all the paperwork and documents you and the buyer should bring to this meeting. This includes any payment as well as business keys, alarm codes, and customer lists. 

Once the sale is complete, you and the buyer will have to complete an Asset Acquisition Statement, or Form 8594, from the IRS. Each of you will file the form with your tax returns.

Transferring Ownership of Your Business

You might sell, or transfer ownership of your LLC, for any of these reasons: 

  • A member leaves the company. 
  • Existing members wish to bring in a new owner/member. 
  • One of the members dies, divorces, or becomes disabled. 
  • You want to sell the entire business.

Which procedure you'll follow depends on what exactly you're doing, i.e., selling the entire business or only making changes to the name or ownership percentages of the members.

Each member (also known as an owner) of the LLC has a “membership interest” in the company, or a percentage of ownership. You'll have to transfer membership interests if you want to add members or change a member's ownership percentage.

When you first formed your LLC, you probably created an operating agreement. This agreement outlines the specifics on how your business operates. If your agreement covers buyout or buy-sell procedures, these will determine how you transfer ownership. If your agreement doesn't have provisions for buyouts or buy-sell procedures, check your state guidelines for transferring membership interests.

You might be able to negotiate an agreement among members or create a written agreement to transfer ownership. Some states will require you to dissolve the LLC if your operating agreement doesn't include provisions for ownership transfers.

You'll have to find a buyer and negotiate a price both of you can agree on. You might have to involve a business valuation expert. The buyer may wish to examine your company books as well. A buyer might only want to purchase your business's assets, or he or she may decide to buy the entire company.

If you want to sell an LLC, you'll sell your membership interests via a bill of sale. You can sell your interests for the amount you want if you operate a single-member LLC. However, if you're part of a multi-member business, your operating agreement may have strict rules in place that keep the business value at a certain amount. Other members in the company could also hold rights of refusal.

Selling an LLC is more complicated than forming one. Due to complex tax, financial, and legal implications, you might want to enlist the services of an attorney with experience in the field of LLC sales.

If you need help selling an LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.